Bitter Fight Looms Over Governor’s Budget Plan : Finances: Democrats vow to oppose Wilson’s tax cut and increase in university fees. Delays in adopting spending proposal could complicate presidential bid.

SACRAMENTO —  For the last two years, Assembly Speaker Willie Brown has been Gov. Pete Wilson’s best friend come budget time, delivering the votes needed to approve his annual spending plans.

But as the Legislature opens hearings on Wilson’s $56.3-billion budget for the next fiscal year, Democrats no longer wax bipartisan. This year, the talk is tough. Democrats are conjuring up memories of 1992, when they warred with Wilson over the budget for 63 days, forcing the state to pay its bills with IOUs.

With the California Legislature now nearly equally split between Democrats and Republicans, Democrats are insisting that the GOP marshal the votes for the budget this summer--a particularly prickly task because conservative Republicans dislike parts of the governor’s spending proposal that they see as being too moderate.

The 1995-96 budget process is young, and there is plenty of time for deals to be struck. But Assembly Democrats are openly hostile toward Wilson and his budget, with its ambitious 15% income and corporate tax cut, sharp welfare reductions and cuts to local government.

“Let the Republicans put up the votes. Why should I have to vote for a budget that I have never liked?” second-term Assemblywoman Martha Escutia (D-Huntington Park) said, describing the budget as “laced with callousness” toward poor women and children.

In the Senate, Democratic tones are less strident. But it was Democrats from the upper house who fired the opening shot in the budget battle in January when all 21 of them proclaimed that they will not support Wilson’s budget so long as it relies on college tuition increases. Wilson’s budget offers a four-year plan for adding money to universities, but it assumes student fees will rise 10%.

“There will be no budget passed this year with fee increases,” said state Sen. Alfred Alquist (D-San Jose), longtime chairman of the Senate Budget Committee.

As Wilson rides high on heady speculation about his potential presidential candidacy, some Democrats relish the prospects of blocking the favorite son’s ascent. Brown offers offhand that the 1995-96 budget may not be passed until next March, coinciding with the California presidential primary.

The state Constitution requires the Legislature to approve the state budget by June 15, and the governor to sign it by July 1. But there is no penalty for breaking that law and it is often broken.

“I’m frankly a little concerned,” Assembly Republican Leader Jim Brulte said. The budget, he said, could be “held hostage to political gamesmanship” and presidential politics. “I hear Willie Brown saying we’re going to have budget gridlock. Bill Clinton would like nothing better.”

Wilson, meanwhile, stumps for his tax cut, and Sean Walsh, his spokesman, said there is a “groundswell for tax reform.”

“There are a number of legislators who, if they do not pass out tax relief, will be calling themselves former legislators,” Walsh said. Noting that the governor has pledged to offer an initiative if legislators refuse to enact the tax cut, Walsh said: “They’ll be hammered and rightly so, and we’ll be handing the hammer to the public.”

Such comments are reminiscent of Wilson’s reelection campaign last year, when he drubbed Democrat Kathleen Brown and led a GOP resurgence in the Legislature.

So far, however, Democrats aren’t cowed. If anything, they are hardening their position, and Wilson is doing little to heal wounds. As many Democrats seethed over Wilson’s embrace of Proposition 187, last year’s anti-illegal immigration initiative, the governor has inflamed them further this year by calling for the abolition of affirmative action.

“It’s hard to respect a man who is so divisive and cynical in his political agenda,” said freshman Assemblyman Antonio Villaraigosa (D-Los Angeles). “He singled out undocumented pregnant women. He singled out undocumented children. He singled out minority contractors. It is just demagoguery, pure and simple.”

Perhaps more serious for Democrats, Wilson is challenging their most loyal campaign donors--trial lawyers and public school teachers--with his far-reaching legislative agenda that includes limiting lawsuits and ending teacher tenure.

Brown characterized Wilson’s chances of winning approval of bills limiting litigation, an issue dear to many of the governor’s supporters, as “slim and none, the twins.”

But the year’s biggest scrape may be over the cornerstone of Wilson’s 1995-96 program--an across-the-board 15% cut in income taxes and corporate and banking taxes spread over three years.

The tax cut, a key component of Wilson’s budget, would remove $225 million from the proposed 1995-96 budget. Over the next four years, the tax cut would take a combined $7.6 billion from future budgets.

That makes the tax cut a major bargaining chip in budget negotiations. The tax cut can be approved by a simple majority in the Legislature, but the Constitution requires that the Senate and Assembly approve the budget--which contains the tax cut’s revenue shortfall--by a two-thirds vote.

Brown says he cannot imagine voting for Wilson’s budget, and sees little chance that he will deliver other Democratic votes.

And the tax cut? “I don’t think the tax cut will get through either house of the Legislature,” the Speaker said.

Even Democrats who strive to be moderate are taking a dim view of the tax cut idea. “No chance,” said Assemblyman and Budget Committee member Louis Caldera (D-Los Angeles).

Republicans, who generally support the tax cut, have parity in the Assembly with 39 seats to the Democrats’ 39 seats, plus an independent and one vacancy. But even if Brulte delivers all 39 Republicans, the governor still needs 15 Democrats.

Democrats and Republicans emerged from the 1992 budget debacle convinced that neither side won. Voters were angry at them all. But this year, some Democrats say they have little to lose by refusing to vote for the governor’s budget, particularly one they say disproportionately targets the poor. In the Assembly, 19 Democrats, Brown among them, are in their final two years because of term limits.

“We’re term-limited. We’re out,” said Assemblyman Bob Campbell (D-Martinez), who is among those leaving. “So what if we’re here until September (trying to pass a budget). What are they going to do to us?”

Campbell said he is “tired of voting for (deceptive) budgets.” Charging that the budget is not balanced, Campbell said: “Let’s not lie anymore. It’s like me selling you a car saying it’s a great car when I know the engine is bad.”

In the Senate, President Pro Tem Bill Lockyer (D-Hayward) also expects Republicans to deliver.

“Even though we enjoy a majority in the Senate, our current role is more appropriate to the party that is not” in power, Lockyer said. “That perhaps brings with it a different approach.”

Lockyer said he doesn’t have a closed mind to the tax cut, but listed several reasons to oppose it, adding, “We might well be committing fiscal suicide by making severe cuts that were unintended.”

Democrats say they might support a tax cut that favors middle-income Californians, but contend that Wilson’s plan ultimately would give high earners, banks and corporations the most benefits. Democrats cite other problems with the tax cut proposal:

* The state’s deficit, estimated at $2 billion, plus several billion more in short-term borrowing to raise cash to pay its bills. Citing the “nagging deficit,” Assemblyman Tom Hannigan (D-Benicia), one of Brown’s top lieutenants, said, “To dwell on a tax reduction would not be responsible.”

* The need for public works projects such as roads, bridges and schools. Schools and state agencies need $25.5 billion for building over the next five years, the legislative analyst’s office estimates. At the first Assembly Budget Committee hearing last week, Assemblyman Tom Bates (D-Berkeley) called the tax cut ludicrous when the state has such needs.

* The fact that, while Wilson proposes giving schools an increase, they would get far more without the tax cut.

* Wilson’s budget proposal to take $241 million from county governments by shifting the cost of welfare to counties. The governor’s aides say the state will compensate for the reduction by paying a greater share of local costs for courts, and giving counties authority to cut welfare programs.

County lobbyists believe that they will take a far greater hit. An analysis by lobbyists for several counties shows that altogether, counties would lose $430 million, with Los Angeles County losing more than $100 million.

Even Brulte said the governor will have to change the formula to soften the blow on local government. Once those changes are made, Brulte said, the budget will have wide GOP support. Wilson’s tax cut bill, which Brulte and Senate GOP Leader Ken Maddy are carrying, also will have “near unanimous” support among Republicans, Brulte said.

But Republican support is not universal. Some conservatives note that to pay for the tax cut in the first years, Wilson would extend two high-income tax brackets that otherwise would expire in 1996.

“(Wilson) will not get my vote,” Assemblyman Bernie Richter (R-Chico) said. “I certainly wouldn’t vote for his tax reduction bill if in fact it amounts to keeping a substantial portion of that (upper income) tax in place in the first year.”

Amid all that, deep animosity between Republicans and Democrats persists in the Assembly.

The bickering stems from the speakership battle in which Brown regained power after Republican Paul Horcher of Diamond Bar bolted his party and voted for Brown. The fight continues, with Republicans pushing the recall of Horcher and freshman Democrat Mike Machado of Stockton for supporting Brown as Speaker. Machado and Horcher would have been likely votes for Wilson’s budget, but not under the current highly charged circumstances.